Former MySpace owner eyes video

Venture money flows into community Web sites

By

SteveGelsi

NEW YORK (MarketWatch) -- MySpace co-founder Brad Greenspan and other investors are sifting around for the next hot Internet property, as MySpace and video-sharing sites like YouTube draw more traffic.

Talk of a MySpace IPO has been bouncing around venture-capital circles, as the Web service continues to gain in popularity less than a year after News Corp.
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bought the community site, which boasts more than 90 million members. See full story.

Greenspan, 33, owned about 10% of Intermix by the time News Corp.
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paid $580 million for its former corporate parent, Intermix Media (including $340 million for MySpace), last year.

Greenspan now has turned his attention to an investment in a online-video site called vidiLife.com.

"We've got about 3 million users a month and growing. And it's a lot of these video shows -- one-off clips that get passed around. ... It's definitely a techie sort of male audience."

He also invested in TikiBarTV.com, which has been featured in promotions for video-playing versions of Apple Computer Inc.'s iPod.

Another video site on his radar screen includes Rocketboom.com, a video blog.

MySpace helped fuel a craze to invest in Internet-community sites and other online-video properties, according to Jonathan Silver, a venture capitalist with Core Capital Partners.

"Video really transforms the social networking sector," he said. "It provides a sensory perception and changes the dynamics of what those sites do. ... It changes the selling experience. You'll see a lot more video in all kinds of retail-related Web sites.

Core Capital decided to position itself behind the transactional ability of video sites with a founding stake in buySafe.com, a new online-bonding agent to help buyers feel safe with unknown merchants.

"When you buy something online with a merchant, buySafe has done the work to check out the vendor," Silver added.

As for the rest of the social-networking sites, he sees more acquisitions in the future than IPOs because many of the sites, although popular, are too small for a stand-alone stock offering.

"The success of MySpace will drive other larger, established media companies to examine whether and how they could play," he said. "Usually, that means buying a smaller company."

'The success of MySpace will drive other larger, established media companies to examine whether and how they could play. Usually, that means buying a smaller company.'
Jonathan Silver, Core Capital Partners

In one of many transactions with video sites, Metacafe said earlier this month that it completed its second of round of venture funding, worth $15 million. The round was led by new investor Accel Partners, with participation from initial backer Benchmark Capital.

Wrangling over MySpace

With the success of MySpace drawing venture capital to the online-video and media categories, Greenspan said that an IPO of the News Corp. site appears to be likely.

He wanted to sell or spin off Intermix's nonessential components and rename the company MySpace, but the people who had control of the company made other plans after forcing him out in 2003.

"I wanted to keep it public," Greenspan asserted in an interview with MarketWatch.

Earlier this year, Greenspan filed suit in Los Angeles Superior Court saying that the merger pact for MySpace may have violated the law by failing to disclose details of the deal to shareholders.

"I voted against it," he said. "I had a competing offer, but the company wouldn't give me any of the diligence material."

A spokeswoman for News Corp. declined to comment.

As he wrangles over the sale, Greenspan added that he's heard rumors that News Corp. will spin off MySpace, in move that could raise hundreds of millions of dollars in an IPO.

News Corp. already made a similar IPO move with Fox Entertainment back in 1998, when it raised about $2.8 billion by floating shares of the entertainment unit. Merrill Lynch
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Goldman Sachs
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and Allen & Co. were the top underwriters of the deal.

Coincidentally, Allen & Co. will just held an annual retreat in Sun Valley, Idaho. Murdoch attended the event.

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